CEASE AND DESIST, ORDER by hzp22842

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									1                       BEFORE THE ARIZONA CORPORATION COmwumlulu
2                                              Arizona Corporation Commission
                 COMMISSIONERS
3                                                DOCKETED
           KRISTIN K. MAYES, Chairman
4                GARY PIERCE                           DEC -8 2009
                PAUL NEWMAN
5            SANDRA D. KENNEDY
                  BOB STUMP
6
     n the matter of:                             ) DOCKET NO. S-20656A-09-0074
7                                                 1
     )AVID W. COLE and SIIRI COLE, husband)
8    nd wife                                DECISIONNO.                         71427
                                                  ).
9    1IGHLINE ESTATES, LLC, an Arizona            )
     imited liability company                     1
10                                                )    ORDER TO CEASE AND DESIST, ORDER
     AUTUAL FINANCIAL SERVICES, LLC               )    FOR RESTITUTION, ORDER FOR
11   d/b/a MFS Real Estate Division and MFS       )    ADMINISTRATIVE PENALTIES AND
     nvestments), an Arizona limited liability    )    CONSENT TO SAME
12   .ompany
                                                       B Y RANDY K. WARD and SHARON WARD
13   REAM CRAFT, LLC, an Arizona limited
     iability company
14
     ;COT A. OGLESBY (d/b/a Arizona Asset
15   vlanagement) and LORI ANN OGLESBY,
     tusband and Wife
16
     UNDY K. WARD (CRD# 4137944) (d/b/a
17   irizona Asset Management) and SHARON
     NARD, husband and wife
18
      e p n e t
     R s o d n s
19
             Respondents RANDY K. WARD (“WARD”) and SHARON WARD (“Respondenl
20
     jpouse”), elect to permanently waive any right to a hearing and appeal under Articles 11 and 12 of
21
     he Securities Act of Arizona, A.R.S. § 44-1801 et seq. (“Securities Act”) with respect to this Order
22
     ’0   Cease and Desist, Order of Restitution, and Order for Administrative Penalties (“Order”).
23
     Lespondent WARD and Respondent Spouse admit the jurisdiction of the Arizona Corporation
24
     :ommission (“Commission”); admit only for the purposes of this proceeding and any other
25
     dministrative proceeding before the Commission the Findings of Fact and Conclusions of Law
26
     ontained in this Order; and consent to the entry of this Order by the Commission.
                                                                          Docket No. S-20656A-09-0074

 1                                                    I.

 2                                         FINDINGS OF FACT

 3           1.     David W. Cole (“Cole”) is an individual who at all relevant times resides in Arizona.

 4           2.     Highline Estates, LLC (“Highline”) is an Arizona limited liability company

 5   organized on or about May 9, 2005. According to Commission records, Cole was Highline’s sole

 6   manager from May 9,2005 until July 2,2006. Mutual Financial Services, LLC (d/b/a MFS Real

 7   Estate and MFS Investments) (“Mfs”) became Highline’s sole manager from July 3,2006 until the

 8   present.

 9           3.     Mfs is an Arizona limited liability company organized on or about January 18,2000.

10   According to Commission records, Mfs is solely managed by Dream Crafl Homes, LLC (“Dream

11   Crafl”).

12           4.     Scot A. Oglesby (d/b/a Arizona Asset Management) (“Oglesby”) is an individual

13   who at all relevant times resides i Arizona.
                                       n
14           5.     RANDY K. WARD (CRD# 4137944) (d/b/a Arizona Asset Management)

15   (“WARD”) is an individual who at all relevant times resides in Arizona. WARD has not been a

16   registered salesman since December 2005.

17           6.     WARD and SHARON WARD were married on February 14, 2007. WARD and

18   SHARON WARD were married at all relevant times thereafter. SHARON WARD is joined in this

19   action under A.R.S.   5 44-2031(C) solely for purposes of determining the liability of the marital
20   community. WARD and SHARON WARD were acting for their own benefit, and for the benefit or

21   in furtherance of the marital community.

22          7.      WARD may be referred to as “Respondent.”

23          8.      SHARON WARD may be referred to as “Respondent Spouse.”

24          9.      Beginning in or around June 2006 until in or around February 2008, Highline,

25   Oglesby, and WARD offered and sold in Arizona at least $688,761.53 in securities in the form of

26   notes (hereinafter “Investments”) to at least 18 investors, the majority of which reside in Arizona.

            10.     The investors in Highline were elderly and unsophisticated.

                                       2                             Decision No.     71427
                                                                           Docket No. S-20656A-09-0074

1           1 1.      Beginning in or around 2004, Cole formed a relationship with Oglesby as both Cole

2    and Oglesby had offices in the same building. At the time Oglesby was a salesperson with a

3    company called Easy Street Financial Group, Inc. (“Easy Street”). Oglesby told Cole he could

4    raise money for Cole’s real estate projects.

5            12.      Beginning in or around 2006, Cole sought to raise capital in order to fund Highline.

6    Highline was to build single family housing units on four undeveloped parcels of land, subdivided

7    into 65 lots, in Phoenix (hereinafter “Highline Project”).

8           13.       Cole was in charge of the Highline Project, but Cole had little experience in buying

9    parcels, building the infrastructure and then selling the homes.

10          14.       Beginning in or around 2006, Cole approached Oglesby to sell the Investments as a

11   product to investors. The Investments were in the form of loan agreements in which investors

12   would provide funds that would be pooled together to fund the construction of the infrastructure

13   and the houses.

14          15.                                                    ih
                       Cole met with Oglesby and WARD, who worked wt Oglesby at Arizona Asset

15   Management, to discuss raising funds for the Highline Project. After at least a few meetings with

16   Cole, Oglesby and WARD agreed to locate investors to raise money by offering and selling the

17   Investments.

18           16.      In May and June 2006, WARD signed an employment application with Mfs. Mfs,

19   through Cole, signed an employment agreement with WARD. WARD was compensated by Mfs

20   for selling the Investments. According to Cole, WARD was paid a six percent commission on the

21   amount raised.

22           17.      Cole, on behalf of Highline and Mfs, hired WARD without conducting a

23   background check or asking about any prior securities violations. WARD, Easy Street and others

24   were subject to a California Department of Corporations Desist and Refrain Order on April 3,2003

25   regarding California securities violations. WARD did not disclose this order to the investors.

26           18.      Cole developed and provided the Highline Investment documents to WARD. The
     Investment documents named Highline as the borrower. The investors were promised their funds

                                        3                               Decision No.   71427
                                                                          Docket No. S-20656A-09-0074

 1   would be invested for a 24-month term at 9.5% interest per year with interest paid monthly. The

 2   Investments listed as security a corporate guarantee and deed of trust. The Investment included

 3   terms that the deed of trust would be filed no later than six months from the date of the agreement.

 4   It also stated that the investor’s deed would be subordinate to any other deed of trust as Highline so

 5   designates without obtaining permission from the investor.

 6           19.    The Investment documents listed WARD as the Mfs Representative.

 7          20.     WARD delivered the investor checks made payable to Highline to Cole.

 8          2 1.    WARD did not discuss with Cole his background or the Highline Project. WARD

 9   did not inquire about Cole’s rea1 estate development background, how long Highline had been in

10   business, whether or not Highline had a business plan, whether Highline had the building permits,

11   offering memoranda, and the timeframe for completing the project. Therefore, this information

12   was not provided to the investors.

13          22.     WARD offered and sold the Investments to investors who sought to reinvest their

14   matured certificates of deposit (“CD) or annuities. Typically, when the investors would call, visit,

15   or be visited by WARD to reinvest their CDs or annuities. WARD would offer and sell the

16   Highline Investment.

17          23.     WARD told investors that the Highline investment paid 9.5% interest each year for

18   a two-year period, which was higher than the rates the investors would get in a CD or an annuity.

19   WARD gave the investors a document which said Highline would pay investors a monthly interest

20   payment.

21          24.     WARD did not ask the investors about their financial condition and their ability to

22   withstand the loss.

23          25.     WARD failed to disclose to investors whether their deeds of trust would be as first

24   deeds of trust or be filed after another deed of trust. WARD failed to disclose that the property was

25   already encumbered by a mortgage.

26          26.     WARD failed to provide any detail regarding financial information of the

     development to the investors. At least one investor received a “current projected land value” of the

                                       4                             Decision No.    71427
                                                                          Docket No. S-20656A-09-0074

 1   lighline project. The projected land equity, after development and land acquisition costs, was

2    ;3,150,000. The investors did not receive any financial information on Highline.

3             27.    After investing, some of the investors received a letter from Cole, as President of

4    dfs, on Mfs letterhead welcoming them to the private lending program, which was the Highline

5    nvestment. Cole enclosed a lenders’ certificate showing Highline as the borrower of funds and a

6    oan agreement noting Highline as the borrower. Cole signed as the Highline representative. In at

7    east one instance, one lenders’ certificate indicated that Mfs was offering the Investment. In at

8    East another instance, the lenders’ certificate indicated Mfs was brokering the Investment.

9             28.    WARD told investors that there was no risk to the Investment because it was

10   ecured by real estate. Although WARD represented that there was no risk, WARD failed to

11   lisclose to investors the existence of a mortgage secured by a first deed of trust.

12            29.    WARD represented that the investors would receive monthly interest payments,

13   Jighline did not pay all investors a monthly interest payment. At least one investor was never paid

14   L   monthly interest payment. Another investor had to contact Cole to receive the monthly interest

15   iayment, but did not receive the first monthly payment until about a year after investing. In yet

16   inother instance, an investor received several monthly interest payments, but then the payments

17   topped.

18            30.    The majority of funds raised from the sale of the Investments were transferred from

19   Jighline to other entities controlled by or through Cole to develop the land. This was not disclosed

20   o the investors.

21            3 1.   At all times relevant, WARD was not registered with the Commission as a dealer or

22   alesman.

23            32.    At all times relevant, the Investments were not registered with the Commission.

24            33.    Highline, Oglesby and WARD raised $688,761.53 from 18 investors, 15 of which

25   r e Arizona residents, returned $37,191.17, for a total of $651,570.36 that is owed to investors.

26            34.    WARD earned $20,836.88 in commissions for raising investor funds.



                                       5                              Decision No.     71427
                                                                            Docket No. S-20656A-09-0074

 1
 2                                                            1
                                                             1.

 3                                         CONCLUSIONS OF LAW

 4            1.    The Commission has jurisdiction over this matter pursuant to Article XV of the

 5   Arizona Constitution and the Securities Act.

 6            2.     WARD offered or sold securities within or from Arizona, within the meaning of

 7   A.R.S.   $5 44-1801(15), 44-1801(21), and 44-1801(26).
 8            3.     WARD violated A.R.S. $ 44-1841 by offering or selling securities that were neither

 9   registered nor exempt from registration.

10            4.     WARD violated A.R.S.       5   44-1842 by offering or selling securities while neither

11   registered as a dealer or salesman nor exempt from registration.

12            5.     WARD violated A.R.S.    5 44-1991 by (a) employing a device, scheme, or artifice to
13   defraud, (b) making untrue statements or misleading omissions of material facts, and (c) engaging

14   in transactions, practices, or courses of business that operate or would operate as a fraud or deceit.

15   Respondent’s conduct included:

16                  a)      WARD failed to disclose to at least one investor the California Department

17   of Corporations Desist and R e f i n Order against WARD for violations of California’s securities

18   laws; and

19                  b)      WARD misrepresented t at least one investor that the Investment had no
                                                 o
20   risk even though the property was already encumbered by a mortgage secured by a first deed of

21   trust;

22            6.    Respondent’s conduct is grounds for a cease and desist order pursuant to A.R.S.

23   5 44-2032.
24            7.    Respondent’s conduct is grounds for an order of restitution pursuant to A.R.S. $44-

25   2032.

26            8.    Respondent’s conduct is grounds for administrative penalties under A.R.S.        5   44-

     2036.

                                       6                               Decision No. 71427
                                                                              Docket No. S-20656A-09-0074

     1          9.         From February 14,2007 to the present, Respondent WARD acted for the benefit of

     2   lis marital community and, pursuant to A.R.S. $8 25-214 and 25-215, this Order of restitution and

     3   tdministrative penalties is a debt of the community.

    4                                                         1.
                                                             11

     5                                                     ORDER

     6          THEREFORE, on the basis of the Findings of Fact, Conclusions of Law, and Respondent’s

     7   :onsent to the entry of this Order, attached and incorporated by reference, the Commission finds that

     8   he following relief is appropriate, in the public interest, and necessary for the protection of

     9   nvestors:

    10          IT IS ORDERED, pursuant to A.R.S. § 44-2032, that Respondent, and any of Respondent’s

    11   Igents, employees, successors and assigns, permanently cease and desist from violating the

    12   Zecurities Act.

    13          IT IS FURTHER ORDERED that Respondent and Respondent Spouse comply with the

    14   tttached Consent to Entry of Order.

    15          IT IS FURTHER ORDERED, pursuant to A.R.S. $ 44-2032, that Respondent shall,

    16   ndividually, pay restitution to the Commission in the amount of $20,836.88. Of this amount,

    17   ;7,731.76 shall, jointly and severally with Respondent, be paid by the marital community of

    18   NARD and Respondent Spouse. Payment shall be made in full on the date of this Order. Any

    19   mount outstanding shall accrue interest at the rate of 10% per annum from the date of this Order

    20   mtil paid in full. Payment shall be made to the “State of Arizona” to be placed in an interest-

    21   )caring account controlled by the Commission.

    22          The Cormnission shall disburse the funds on a pro-rata basis to investors shown on the

    23   ,ecords of the Commission. Any restitution funds that the Commission cannot disburse because an

    24   nvestor refuses to accept such payment, or any restitution funds that cannot be disbursed to an

    25   nvestor because the investor is deceased and the Commission cannot reasonably identify and

1   26   ocate the deceased investor’s spouse or natural children surviving at the time of the distribution,

         :hall be disbursed on a pro-rata basis to the remaining investors shown on the records of the

                                            7                            Decision No. 71427
                                                                              Docket No. S-20656A-09-0074

     1   Commission. Any funds that the Commission determines it is unable to or cannot feasibly

     2   disburse shall be transferred to the general fund of the state of Arizona.

     3          IT IS FURTHER ORDERED, pursuant to A.R.S. § 44-2036, that Respondent and the

     4   marital community of WARD and Respondent Spouse, shall jointly and severally, pay an

     5   administrative penalty in the amount of $25,000.00. Payment shall be made to the “State of

     6   Arizona.” Any amount outstanding shall accrue interest at the rate of 10% per annum fiom the

     7   date of this Order until paid in full. The payment obligations for these administrative penalties

     8   shall be subordinate to any restitution obligations ordered herein and shall become immediately

     9   due and payable only after restitution payments have been paid in full or upon Respondents’

    10   default with respect to Respondents’ restitution obligations.

    11          For purposes of this Order, a bankruptcy filing by Respondent or Respondent Spouse shall

    12   be an act of default. If Respondent or Respondent Spouse does not comply with this Order, any

    13   outstanding balance may be deemed in default and shall be immediately due and payable.

    14          IT IS FURTHER ORDERED, that if Respondent or Respondent Spouse fails to comply

    15   with this order, the Commission may bring further legal proceedings against that Respondent,

    16   including application to the superior court for an order of contempt.

    17          IT IS FURTHER ORDERED, that no finding of fact or conclusion of law contained in this

    18   Order shall be deemed binding against any Respondent under this Docket Number who has not

    19   consented to the entry of this Order.

    20

I   21   ..
    22   ..
    23   ...
    24   ..
    25   ..
    26   .,,
         ...
                                           8                              Decision No.   71427
                                                                          Docket No. S-20656A-09-0074

    1          IT IS FURTHER ORDERED that this Order shall become effective immediately.

    2                  BY ORDER OF THE ARIZONA CORPORATION COMMISSION
    3
    4

    5
         :HAIRMAN
    6
    7
    8
         :OMMISSIONER
    9

    10                                       IN WITNESS WHEREOF, I, ERNEST G. JOHNSON,
    11                                       Executive Director of the Arizona Corporation
                                             Commission, have hereunto set my hand and caused the
                                             official seal of the Commission to be affixed at the
    12
    13
                                             Capitol, in the City of Phoenix, this
                                               a&.-.,&               ,2009.
                                                                                      r@   day of


    14
                                                  I        r
    15
                                               - G. JOHN€K%
                                             ERNEST
                                                     17                                       -

    16
                                             EXECUTIVE DIRECTOR
    17

    18

    19
    20
         IISSENT
    21
         rhis document is available in alternative formats by contacting Shaylin Bernal, ADA Coordinator,
~
    22   Joke phone number 602-542-3931, e-mail sbemal@azcc.gov.
I

    23

    24
    25

    26



                                         9                            Decision No. 71427
                                                                         Docket No. S-20656A-09-0074

 1                                 CONSENT TO ENTRY OF ORDER

 2           1.     Respondents RANDY K. WARD (“Respondent”) and SHARON WARD

 3   (“Respondent Spouse”) admit the jurisdiction of the Commission over the subject matter of this

 4   proceeding. Respondent and Respondent Spouse acknowledge that Respondent and Respondent

 5   Spouse have been fully advised of their right to a hearing to present evidence and call witnesses

 6   md they knowingly and voluntarily waive any and all rights to a hearing before the Commission

 7   md all other rights otherwise available under Article 11 of the Securities Act and Title 14 of the

 8   Arizona Administrative Code. Respondent and Respondent Spouse acknowledge that this Order to

 9   Cease and Desist, Order of Restitution and Order for Administrative Penalties (“Order”)

10   constitutes a valid final order of the Commission.

11           2.     Respondent and Respondent Spouse knowingly and voluntarily waive any right

12   under Article 12 of the Securities Act to judicial review by any court by way of suit, appeal, or

13   extraordinary relief resulting from the entry of this Order.

14           3.     Respondent and Respondent Spouse acknowledge and agree that this Order is

15   Entered into freely and voluntarily and that no promise was made or coercion used to induce such

16   mtry.

17           4.     Respondent and Respondent Spouse understand and acknowledge that Respondent

18   md Respondent Spouse have a right to seek counsel regarding this Order, and that Respondent and

19   Respondent Spouse have had the opportunity to seek counsel prior to signing this Order.

20   Respondent and Respondent Spouse acknowledge and agree that, despite the foregoing, they freely

21   md voluntarily waive any and all right to consult or obtain counsel prior to signing this Order.

22           5.     Respondent and Respondent Spouse admit only for the purposes of this proceeding

23   md any other administrative proceeding before the Commission the Findings of Fact and

24   Zonclusions of Law contained in this Order; and consent to the entry of this Order by the

25   Zoommission the Findings of Fact and Conclusions of Law contained in this Order. Respondent

26   md Respondent Spouse agree that they shall not contest the validity of the Findings of Fact and



                                       10                           Decision No.     71427
                                                                           Docket No. S-20656A-09-0074

 1   :onclusions of Law contained in this Order in any present or future administrative proceeding

2    efore the Commission.

3            6.     By consenting to the entry of this Order, Respondent and Respondent Spouse agree

4    ot to take any action or to make, or permit to be made, any public statement denying, directly or

5    idirectly, any Finding of Fact or Conclusion of Law in this Order or creating the impression that

6    lis Order is without factual basis. Respondent and Respondent Spouse will undertake steps

7    ecessary to assure that all of their agents and employees understand and comply with this

 8   greement.

9            7.     While this Order settles this administrative matter between Respondent, Respondent

10   pouse, and the Commission, Respondent and Respondent Spouse understand that this Order does

11   ot preclude the Commission from instituting other administrative or civil proceedings based on

12   iolations that are not addressed by this Order.

13           8.     Respondent and Respondent Spouse understand that this Order does not preclude

14   le Commission from referring this matter to any governmental agency for administrative, civil, or

15   riminal proceedings that may be related to the matters addressed by this Order.

16           9.     Respondent and Respondent Spouse understand that this Order does not preclude

17   ny other agency or officer of the state of Arizona or its subdivisions from instituting

18   dministrative, civil, or criminal proceedings that may be related to matters addressed by this

19   kder.

20           10.    Respondent agrees that Respondent will not apply to the state of Arizona for

21   :gistration as a securities dealer or salesman or for licensure as an investment adviser or

22   ivestment adviser representative until such time as all restitution and penalties under this Order

23   re paid in full.

24           11.    Respondent agrees that Respondent will not exercise any control over any entity

25   iat offers or sells securities or provides investment advisory services within or from Arizona until

26   uch time as all restitution and penalties under this Order are paid in full.



                                       11                             Decision No. 71427
                                                                             Docket No. S-20656A-09-0074

     1          12.     Respondent agrees that Respondent will not sell any securities in or from Arizona

     2   without being properly registered in Arizona as a dealer or salesman, or exempt from such

     3   registration; Respondent will not sell any securities in or from Arizona unless the securities are

     4   registered in Arizona or exempt from registration; and Respondent will not transact business in

     5   Arizona as an investment adviser or an investment adviser representative unless properly licensed

     6   in Arizona or exempt from licensure.

     7          13.     Respondent and Respondent Spouse agree that they will continue to cooperate with

     8   the Securities Division including, but not limited to, providing complete and accurate testimony at

     9   any hearing in this matter and cooperating with the state of Arizona in any related investigation or

    10   any other matters arising from the activities described in this Order. This provision shall not

    11   constitute a waiver of Respondent’s state and federal rights against self-incrimination.

    12          14.     Respondent and Respondent Spouse acknowledge that any restitution or penalties

    13   imposed by this Order are obligations of Respondent, as well as the marital community.

    14          15.     Respondent and Respondent Spouse consent to the entry of this Order and agree to

    15   be fully bound by its terms and conditions.
,   16          16.     Respondent and Respondent Spouse acknowledge and understand that if

    17   Respondent or Respondent Spouse fail to comply with the provisions of the order and this consent,

    18   the Commission may bring further legal proceedings against them, including application to the

    19   superior court for an order of contempt.

    20          17.     Respondent and Respondent Spouse understand that default shall render

    21   Respondents and the marital community of Respondent Spouse liable to the Commission for its

    22   Eosts of collection and interest at the maximum legal rate.

    23   ...
    24   ...
    25   ...
    26   ...
         ...
                                           12                           Decision No.     71427
                                                                          Docket No. S-20656A-09-0074

1         18.       Respondent and Respondent Spouse agree and understand that if Respondent or

2    espondent Spouse fail to make any payment as required in the Order, any outstanding balance

3    iall be in default and shall be immediately due and payable without notice or demand.

4    espondent and Respondent Spouse agree and understand that acceptance of any partial or late

5    ayment by the Commission is not a waiver of default by Commission.

6
 7
8
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10

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     iUBSCRIBED AND SWORN TO BEFORE me this                    day of                         2009.
12

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15   dy commission expires:

16     3/26/2        d i/


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2c
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                                                                                       .
     SUBSCRIBED AND SWORN TO BEFORE me this             J& of
                                                          day              &’fl:-&m

2:

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2f
     My commission expires:
2(
        3 / 2 4 o/‘ /’
                /                                  My CommissionExpires


                                     13                              Decision No. 71427
                                                        Docket No. S-20656A-09-0074
     SERVICE LIST FOR                     ORDER TO CEASE AND DESIST, ORDER
1                                         FOR RESTITUTION, ORDER FOR
                                          ADMINISTRATIVE PENALTIES AND
2                                         CONSENT TO SAME BY: RANDY K. WARD
                                          AND SHARON WARD
3
     DOCKET NO.:                          S-20656A-09-0074
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5
     Scot Oglesby
6    515 East Carefree Highway, No. 824
     Phoenix, AZ 85085
7
     Respondent
8
     Randy Ward
9    3 153 W Whitman Dr.
     Anthem,AZ 85086
10   Respondent
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                                    14               Decision No.   71427

								
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